Dividends and Preparation for lockdown drives Nestle sales growth

Imagine yourself working with a food giant similar to Nestle before the virus, the company through a variety of divisions has good market share, many of its brands likely in the average person’s shelf and most of the competition is fighting for a higher 1 to 2%. Then comes the virus concerns and consumers begin to stockpile your products. That was both good and bad, it is good because according to an article by Siddharth Cavale and John Revil of Reuters, sales in North America and Europe increased by 4.3% beating analyst’s expectations of 3%.

In North America. Purina Pet care sales rose by double-digit percentage, while Nescafe and Coffee-Mate had high single digit increases. In the Middle East and Northern Africa Maggi noodles did very well.

Chief Executive Mark Schneider said Nestle was working to adapt to market conditions to ensure it had enough raw materials and factory capacity to meet the expected demand. (this is the bad – higher costs for raw materials and labor), but hopefully increased sales offsets it. The difficulty at Nestle is what is the future? what will demand be? Mr. Schneider believes the recovery will be slow.

A company such as Nestle sales to individuals and institutions or restaurants, cafeterias, etc. The sales to individuals were up, but sales to restaurants because they are closed was down. Nestle launched a financing program for the coffee machines it rents or leases.

Nestle is trying to concentrate on organic sales and is actively looking at possible takeover targets.

Linking to dividend paying stocks, for Nestle which pays a dividend the virus is good because they have the ability to ensure they could ramp up to the individual demand and begin to look for opportunities of companies which have great products but not the financial ability to be agile. One of the reasons to invest in dividend paying companies is if they are reasonably well managed, they can look for opportunities to enhance profits to continue to pay dividends.

There are more questions than answers, till the next time – to raising questions.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s